This paper develops a conceptual framework on the strategic development of subsidiaries and the direct employment of skilled labour. The framework is based on autonomy, and intra and inters organizational relationships. The conceptual model outlines the conditions that are likely to lead to too much, or too little, autonomy and intra and inter organizational relationships. This model is then used to develop propositions on the links between autonomy and intra and inter organizational relationships and direct employment of skilled labour.

The paper investigates the consequences of interactions between autonomy, intra and inter-organizational networks for the performance of subsidiaries. Furthermore, the paper analyzes the impact of changes in autonomy and network relationships rather than investigating levels. This introduces the concept of adjustment of subsidiary strategies to changes in the international and host country business environment. Based on a survey of 350 foreign owned subsidiaries located in the UK, Germany and Denmark, we find evidence that increases in the inter-organizational network relationships of subsidiaries lead to increased subsidiary performance. Further, increased subsidiary autonomy positively affects subsidiary inter-organizational network relationships, and to some degree negatively affects intra-organizational network relationships. Finally, overlapping effects between inter- and intra-organizational network relationships are found.